Construction Litigation – Real Estate & Construction Lawhttps://www.csrealconblog.com
Tue, 19 Feb 2019 17:06:54 +0000en-UShourly1https://wordpress.org/?v=4.9.10https://realestateandconstructionlawmonitor.lexblogplatform.com/wp-content/uploads/sites/53/2016/04/cropped-favicon-10.46.56-AM-32x32.pngConstruction Litigation – Real Estate & Construction Lawhttps://www.csrealconblog.com
3232Execute Your NJ Construction Lien Properly or Face Forfeiturehttps://www.csrealconblog.com/2019/01/articles/construction/execute-nj-construction-lien-properly-face-forfeiture/
https://www.csrealconblog.com/2019/01/articles/construction/execute-nj-construction-lien-properly-face-forfeiture/#respondTue, 08 Jan 2019 15:30:24 +0000https://www.csrealconblog.com/?p=2001New Jersey’s Appellate Division has once again served a stark reminder to prospective construction lien claimants regarding who may validly sign a construction lien claim. The consequences of failing to properly execute a construction lien claim are dire – not only because the lien claim is subject to discharge, but along with that discharge may come an order requiring the payment of the attorneys’ fees and costs of the party making application for such discharge.

In Diamond Beach, LLC v. March Associates, Inc., Docket No. A-1704-17T1 (N.J. App. Div. December 24, 2018) (approved for publication), the court determined that the 2011 revisions to the Construction Lien Law did not serve to clarify or limit the then-existing construction lien signatory requirements, and therefore the 2011 revisions did not apply retroactively to lien claims filed prior to 2011. Before the 2011 revisions, Lien Law Section 6 explicitly required that a lien be executed by a corporation’s “duly authorized officer.” The 2011 revisions to Section 6 removed the “duly authorized officer” language, and instead stated that the lien claim form, provided in Section 8, “be signed, acknowledged and verified by oath of the claimant[.]” The form in Section 8, however, requires that an “officer/member” sign the form, and the suggested notary form provides that the notary be satisfied that the signatory is the “Secretary (or other officer/manager/agent) of the Corporation (partnership or limited liability company)” with “authority to act on behalf of the Corporation (partnership or limited liability company) and who, by virtue of its Bylaws, or Resolution of its Board of Directors (or partnership or operating agreement) executed the [lien claim] on its behalf.”

The trial court in Diamond Beach had ordered that the subject lien claim be discharged because it had been signed by the subcontractor lien claimant’s Accounting & Information Systems Manager, and there was insufficient evidence to support the claimant’s contention that that manager had been expressly authorized to execute lien claims by the claimant’s Board of Directors. Thus, the court found, under the pre-2011 Lien Law, that the lien claim had not been executed by a “duly authorized officer” of the lien claimant. The trial court further awarded attorneys’ fees to the project owner, which had sought the discharge of the lien. The Appellate Division affirmed the trial court’s determinations, including the award of fees, reading broadly Lien Law Section 15’s language regarding the circumstances under which lien rights are forfeited and an affected party is entitled to a fee award for obtaining such a determination.

Even under the post-2011 Lien Law, the court signaled that the results would have been the same for essentially the same reasons. In last year’s published decision, NRG REMA LLC v. Creative Environmental Solutions Corp., 454 N.J. Super. 578 (App. Div.), certif. denied, 234 N.J. 577 (2018), the court conducted much the same analysis under the current law, and held a lien claim unenforceable that had been signed by the claimant’s “financial director” without any written evidence presented that such “financial director” was a corporate officer or designated by the Board of Directors to execute such documents on behalf of the claimant. In doing so, the court noted that the Lien Law’s “procedural requirements were intended to be stringently applied.”

The critical lesson from the foregoing cases is that any business entity, however formed, that seeks to file a New Jersey construction lien claim, must ensure that the person signing that lien claim, is authorized to do so by the governing documents of that business entity – or by a written resolution or authorization duly executed by the appropriate board, officer, member or partner of that business entity – as that entity’s business form dictates. The failure to have a properly-authorized individual execute the lien claim will, if challenged, prove fatal to the lien claim and extremely costly to the lien claimant.

]]>https://www.csrealconblog.com/2019/01/articles/construction/execute-nj-construction-lien-properly-face-forfeiture/feed/0The “Time Of Application” Rule Will Not Protect Developers Who Submit Incomplete Applications.https://www.csrealconblog.com/2018/08/articles/construction/land-use-and-development/time-application-rule-will-not-protect-developers-submit-incomplete-applications/
https://www.csrealconblog.com/2018/08/articles/construction/land-use-and-development/time-application-rule-will-not-protect-developers-submit-incomplete-applications/#respondTue, 28 Aug 2018 14:43:23 +0000https://www.csrealconblog.com/?p=1995Developers often employ the “time of application” rule (“TOA Rule”) to avoid having to comply with certain legal requirements enacted after an application has been submitted to a local planning or zoning board. More specifically, the TOA Rule provides that “notwithstanding any provision of law to the contrary, those development regulations which are in effect on the date of submission of an application for development shall govern the review of that application….” SeeN.J.S.A. 40:55D-10.5 (emphasis added). Notwithstanding this statutory provision, developers must still comply with any new laws that specifically relate to health and public safety.

The TOA Rule replaced the “time of decision” rule, which allowed municipalities to apply new or amended ordinances to pending development applications. As a result, applicants were often compelled to incur significant costs and delays associated with altering their applications in an effort to meet the new legal requirements. The TOA Rule only applies, however, once a development application has been “submitted” to a municipality. Until that time, a developer remains responsible for complying with all legal requirements regardless of when they took effect.

While the term “submission” is not expressly defined under the statute, the New Jersey Supreme Court squarely addressed the issue in Dunbar Homes, Inc. v. Zoning Board of Adjustment of Franklin Township, 233 N.J. 546 (2018). In Dunbar Homes, the developer filed an application to construct 55 garden apartments on a site where garden apartments were considered a permitted conditional use. The next day, the Township enacted an ordinance that prohibited garden apartments in the zone where the site was located. The zoning official subsequently determined that the developer had not submitted all documents required by the zoning board’s development application checklist. The developer was then notified that the TOA Rule was inapplicable and that it would need to file a new application with the zoning board seeking a “use” variance pursuant to the more stringent standards implicated by N.J.S.A. 40:55D-70(d)(1).

The zoning board sided with the zoning official and the developer appealed to the Law Division. The Law Division judge disagreed and concluded that the application was deemed “submitted” because it provided the board with “sufficient information to begin its review” and, therefore, the TOA Rule applied. The Township appealed and the Appellate Division reversed that decision after finding that the relevant statute defining the term “application for development” included all documents prescribed by the board’s checklist for development. Applying this bright-line rule, the Appellate Division concluded that the failure to submit even one of the items on the board’s checklist precluded application of the TOA rule. The Supreme Court ultimately agreed with the Appellate Division, noting that N.J.S.A. 40:55D-3 expressly defined an “application for development” to include: “the application form and all accompanying documents required by ordinance.” Because it was undisputed that the developer failed to submit all required documentation and neither sought nor obtained a waiver regarding any requirements, the Court found that the application was never submitted and the TOA Rule did not apply.

Accordingly, developers must be certain to submit all documents identified in the municipal development application checklist or seek and obtain a waiver. Only by vigorously complying with the requirements of the municipal checklist can a developer expect to avail itself of the protections afforded by the TOA Rule.

]]>https://www.csrealconblog.com/2018/08/articles/construction/land-use-and-development/time-application-rule-will-not-protect-developers-submit-incomplete-applications/feed/0Rights, Remedies and Procedures for Addressing Construction Defect Claims in Floridahttps://www.csrealconblog.com/2018/08/articles/construction/rights-remedies-procedures-addressing-construction-defect-claims-florida/
https://www.csrealconblog.com/2018/08/articles/construction/rights-remedies-procedures-addressing-construction-defect-claims-florida/#respondThu, 16 Aug 2018 13:44:43 +0000https://www.csrealconblog.com/?p=1977Florida has implemented a rather simple statutory scheme to address claims that a real property owner believes she may have against a contractor, subcontractor, supplier or design professional for construction defects on her property—whether those defects involve construction, repairs, remodeling or alterations to the property. The law, Florida StatutesSections 558.001-005, attempts to strike a balance between protecting the rights of property owners and reducing the litigation associated with such claims.

In a nutshell, before a property owner files a lawsuit in court or a demand for arbitration, to the extent arbitration is required, she must first, at least 60 days (120 days if the action involves an association that represents more than 20 parcels) prior to filing that lawsuit or demand for arbitration, serve a written notice of her claim on the contractor, subcontractor, supplier or design professional whom she claims is responsible for the defects. Defects encompass a number of different deficiencies arising from defective materials, components and products; violations of applicable codes; failure of a design professional to comply with applicable standards; or a failure to build or remodel property consistent with accepted trade standards.

The 60-day pre-suit notice must describe in detail each and every construction defect that the owner believes exists, as well as all known damages resulting from the defects and the location of each defect. Within 30 days of service of the owner’s notice of claim, the contractor, subcontractor, supplier or design professional to whom the notice is directed is entitled to inspect the property in order to assess each defect. If the contractor, subcontractor, supplier or design professional determines that destructive testing is necessary to determine the nature of the alleged defects and what caused those defects, there are certain other notice rights and obligations associated with that destructive testing, including the right of the owner to object under Florida Statutes Sec. 558.004.

Within 45 days after service of the property owner’s notice of claim, the contractor, subcontractor, supplier or design professional served with that notice is required to serve a written response which must provide for one of the following:

an offer to remedy the defect, at no cost to the owner, with a detailed description of the necessary repairs and the timetable for completion;

an offer to settle the claim by a payment of money;

a hybrid, for lack of a better term, offer to settle the claim by a combination of repairs and a monetary payment, with, again a description of the required repairs and the timetable to complete those repairs;

a statement that the claim is disputed and that there will be no attempt to remedy the alleged defect or settle the claim;

a statement that any monetary payment will be determined by the contractor’s, subcontractor’s, supplier’s or design professional’s insurance company within 30 days after the insurance company is notified of the claim. This statement may include an offer under paragraph c.) contingent upon the owner accepting the carrier’s determination whether to make an additional payment of money.

An owner who receives a settlement offer must serve a written notice of acceptance or rejection within 45 days after receiving that offer. If the contractor, subcontractor, supplier of design professional either disputes the owner’s notice of claim or does not respond to it, the owner can, without any further notice, file a lawsuit or demand for arbitration, where applicable.

If a contractor, subcontractor, supplier or design professional is sued for alleged construction defects without the owner first providing any pre-suit notice, that contractor, subcontractor, supplier or design professional should immediately move to stay the lawsuit under Florida Statutes Sec. 558.003

]]>https://www.csrealconblog.com/2018/08/articles/construction/rights-remedies-procedures-addressing-construction-defect-claims-florida/feed/0Lien Rights of Contractors, Subcontractors and Suppliers of Materials Under Florida Lawhttps://www.csrealconblog.com/2018/07/articles/construction/lien-rights-contractors-subcontractors-suppliers-materials-florida-law/
https://www.csrealconblog.com/2018/07/articles/construction/lien-rights-contractors-subcontractors-suppliers-materials-florida-law/#respondMon, 16 Jul 2018 17:31:18 +0000https://www.csrealconblog.com/?p=1960Home renovations and repairs is big business in Florida, especially in densely populated south Florida where it seems that every available square foot of property is occupied by a residence or commercial building. That said, it is important to understand the lien rights of contractors, subcontractors and suppliers of materials under Florida law.

First, it is important to understand whether there is a difference between the lien rights of a company that has a contract with the owner of real property as opposed to a company that does not have such a contract. The prime example of the latter is a subcontractor or supplier of materials for the company that actually does have the contract with the homeowner. One who has a contract with an owner is said to be in privity with the owner, meaning the relationship between the two parties is recognized by law.

The short answer is that both those in privity and those not in privity with owners of real property have lien rights in that Florida Statutes Sec. 713.01 includes in its definition of lienors, contractors, subcontractors and those who contract with contractors and subcontractors. The means of perfecting or protecting those lien rights is, however, different.

As an example, let’s say a homeowner contracts with Company A to install a new roof on her property. The homeowner and Company A sign a clear, definite contract. Company A, in turn, contracts with Company B to supply it with all of the materials to install the roof. Company A and Company B have their own separate contracts, but there is no contract between the property owner and Company B.

Once the job is completed the owner refuses to pay the rather substantial balance that is due and owing to Company A. Company A, in turn, does not pay the balance that it owes to Company B. How do each of these respective companies perfect its lien rights on the owner’s real property?

For Company A, the process is quite simple. Under Florida Statutes Sec. 713.08, it must record a document known as a claim of lien in the county where the real property is located within 90 days of the last date that it provided labor, services or materials. The statute sets forth, in detail, what must be contained in that claim of lien, and the actual form is provided in Florida Statutes Sec. 713.08. Amongst other things, the claim of lien must include the name and address of Company A; the labor, services and materials that were furnished and the contract price or the value of what was provided; the name of the owner of the real property; a description of that real property; when labor, services and materials were first and last furnished; and the amount unpaid.

Company B’s ability to perfect its lien rights is a bit more involved. Although it, too, must record a claim of lien and comply with the requirements of Florida Statutes Sec. 713.08, it has an additional step it must take to ensure that its lien rights are protected. Pursuant to Florida Statutes Sec. 713.06, prior to furnishing materials or within 45 days of first furnishing such materials, it must serve the owner with a document known as a notice to owner. Again, the statute sets forth the actual form—which is quite brief and straightforward– that must be provided, and that form will contain Company B’s name and address, the description of the real property and a description of the materials that were supplied or are being supplied.

]]>https://www.csrealconblog.com/2018/07/articles/construction/lien-rights-contractors-subcontractors-suppliers-materials-florida-law/feed/0Subcontractor Lien Claims “Salvaged” in New Jerseyhttps://www.csrealconblog.com/2018/06/articles/construction/subcontractor-lien-claims-salvaged-new-jersey/
https://www.csrealconblog.com/2018/06/articles/construction/subcontractor-lien-claims-salvaged-new-jersey/#respondMon, 04 Jun 2018 13:35:29 +0000https://www.csrealconblog.com/?p=1946Published cases examining the New Jersey Construction Lien Law (“CLL”) tend to be few and far between, but recently the Appellate Division issued a decision to be published, helping to further illuminate, albeit on a fairly narrow issue, the scope of the CLL. In NRG REMA LLC v. Creative Environmental Solutions Corp., Docket Nos. A-5432-15T3, A-0567-16T3 (N.J. Super. App. Div. April 25, 2018), the court analyzed the novel issue of whether, under the CLL, the salvage value of scrap recovered by a demolition contractor may be included in the “lien fund” available for distribution among lien-filing subcontractors and suppliers within that contractor’s chain of contracting.

In NRG REMA, the owner entered into a contract directly with a demolition contractor, pursuant to which the contractor actually agreed to pay the owner $250,000 for the right to demolish a power station but also for title to and the right to sell the resulting scrap metals and equipment (which it estimated at the time would net it millions of dollars). While the CLL explicitly allows liens to be filed for demolition work, it does not specifically contemplate this type of payment arrangement in determining the “lien fund” – which, at the top contracting tier, is typically based on the simple calculation of the amount owed under the written contract from owner to contractor for the work performed through the date of the lien filing. Thus, subject to certain limited exceptions, the more paid to the contractor prior to the lien filing, the less the lien fund available for distribution.

While the CLL’s lien fund provision and its lien claim form speak only in monetary terms, other relevant CLL provisions, incorporate the term “contract” whose definition refers to “price or other consideration to be paid” the contractor. In this case, because the contract specifically required the transfer of title to the salvage materials to the contractor and “it was an essential component of the price [the owner] agreed to pay,” the court deemed such transfer non-monetary “consideration to be paid” to the contractor, and, therefore, part of the “contract price” paid by the owner to the contractor.

Following a lengthy analysis and a balancing of the interests between owner and lien claimant, the court ultimately concluded that, in this case, the lien fund calculation should be based on a contract amount that includes the value of the scrap obtained by the contractor pursuant to its contract, but reduced by the contractor’s cash payment to the owner made prior to the lien’s filing (note: where a contractor was paid for the demolition work and also received title to the salvage, the payment to the contractor would be added to the salvage value to calculate the total contract price). The court further held that because the owner had transferred title to the scrap at the outset of contract performance, rather than incrementally, the value of the transferred scrap did not reduce the lien fund at that top tier at the time of such transfer, as the CLL provides that the lien fund is not reduced where the owner makes payment of unearned amounts to a contractor prior to a subcontractor’s lien filing.

The court, however, remanded the case back to the trial court for the difficult task of determining, for each lien claimant, both of which resided on the third-tier, the amount of the lien fund that was available at the time each such lien was filed based on the percentage of completion of the work at that time. The court also made clear that it was solely dealing with the facts before it, and it identified a number of issues along the way, which if the facts were different may require a different analysis or outcome, and which the court made clear, it was not determining in its decision. Thus, while instructive and useful when dealing with a project on which a contractor obtains salvage rights, the decision is fairly narrow and limited to the facts of that case.

After the court’s extensive analysis on the lien fund issue, and an apparent victory for the lien claimants, the court found that one of those lien claimants, however, committed a critical technical error in the execution of its lien which precluded its enforcement. The court reiterated and strictly applied the CLL’s express requirement that a signatory of a lien claim must be an authorized corporate officer pursuant to the company’s bylaws or as designated by board resolution. The court found that one of the subject liens had been executed by an employee who was informally titled the company’s “financial director”, and had not been properly authorized to execute a lien on behalf of the company. This case, therefore, serves as an additional warning that any company seeking to file a CLL lien must strictly adhere to its express provisions, lest it risk forfeiture of its lien claim and a potential damages claim based on an improper filing.

Update: The property owner has appealed the Appellate Division’s decision to the New Jersey Supreme Court, so we will monitor whether the Supreme Court decides to hear the case, and if so, what decision it renders.

]]>https://www.csrealconblog.com/2018/06/articles/construction/subcontractor-lien-claims-salvaged-new-jersey/feed/0NYC Property Owners: Neighbors Who Are Renovating Might Use Your Property For Free.https://www.csrealconblog.com/2017/12/articles/construction/nyc-property-owners-neighbors-renovating-might-use-property-free/
https://www.csrealconblog.com/2017/12/articles/construction/nyc-property-owners-neighbors-renovating-might-use-property-free/#respondMon, 11 Dec 2017 14:13:13 +0000https://www.csrealconblog.com/?p=1938The New York City Building Code, Chapter 33, requires a developer to safeguard adjoining property during the conduct of all construction and demolition operations. Accordingly, a developer and an adjoining property owner may enter into a license agreement, whereby the adjoining property owner provides the developer with access to its property to install Code-required protections. In return, oftentimes the developer, among other things, pays compensation to the adjoining property owner for such access. If the parties cannot reach an agreement, the developer may seek to compel such access through the courts pursuant to Section 881 of the Real Property Actions and Proceedings Law.

While the Building Code does not explicitly provide a right to compensation, when these issues have been brought before them, New York courts have awarded compensation to adjoining property owners. However, whether compensation is mandated and the amount of compensation is within the courts’ discretion. Courts often consider the length of time for which access is necessary and the intrusiveness of the developer’s work on the use and enjoyment of the adjoining property by its owner and occupants. Without clear guidance from the courts, a developer and an adjoining property owner need to give due consideration to the issue of compensation as illustrated below.

In her ruling released late last month, Manhattan Judge Arlene Bluth denied any license fee to the Condominium Board of the Fifth Avenue Tower, an adjoining property owner to the New York Public Library. The Library will conduct a $200 million overhaul of its main Fifth Avenue branch. In her decision, Judge Bluth specifically rejected the Condominium Board’s request for a $15,000 / month license fee. It has been separately reported that the Condominium Board rejected the Library’s offer of a $3,500 / month license fee. It appears that Judge Bluth may have denied any license fee to the Condominium Board based, at least in part, on the excessiveness of its demands.

In view of the lack of clear guidelines, developers and adjoining property owners should consult with their legal counsel and should be sure not to overplay their hands when negotiating license fees.

]]>https://www.csrealconblog.com/2017/12/articles/construction/nyc-property-owners-neighbors-renovating-might-use-property-free/feed/0Contractors, Know Your Contracts!https://www.csrealconblog.com/2017/11/articles/construction/contractors-know-contracts/
https://www.csrealconblog.com/2017/11/articles/construction/contractors-know-contracts/#respondWed, 15 Nov 2017 16:28:35 +0000https://www.csrealconblog.com/?p=1929Last week, New Jersey’s Appellate Division re-affirmed the principle that a court must strictly apply the terms of a construction contract when determining a dispute between contracting parties. Where the contract terms speak directly to the issue in dispute, a court may not employ equitable considerations to determine the dispute even if the court believes that strictly applying the contract terms would be unfair to one of the parties under the circumstances.

While this is not a novel legal principle, the Appellate Division, in its unpublished opinion, Wallace Bros, Inc. v. East Brunswick Board of Education, Docket No. A-1432-15T3 (N.J. App. Div. Nov. 9, 2017), reiterated this tenet in reversing a trial court that granted summary judgment to a general contractor that claimed it was owed final payment on a school construction project because the school board had waited too long to object to the contractor’s work. The Appellate Division found that there were numerous material factual disputes between the parties when examining their allegations and the language in the parties’ contract. It, therefore, reversed the trial court’s judgment, and remanded the case back to the trial court for further proceedings. Critically, it appeared from the facts proffered by the school board that the contractor had not yet complied with the contract’s provisions regarding the right to receive final payment, such as the contractor’s obligations to provide standard close-out documentation and its failure to complete punch-list work.

Wallace Bros. serves as a reminder of how important it is for a contractor to review and, where possible, negotiate the terms of a contract before signing it, and then strictly comply with all contract provisions during the course of the project through completion. In the public contracting context, as in Wallace Bros., the contractor generally must accept the terms of the contract on which it bids. It then must strictly follow the procedures set forth in that contract when seeking payment for its work, particularly those provisions which explicitly set forth prerequisites to payment. For example, change order provisions will typically require written documentation signed by the owner setting forth the additions or changes to the specified contract work, along with the price to be paid for that work, before such work is even performed, and therefore before payment is required to be made by the owner for any such work.

Also, as illustrated in Wallace Bros., contractors must be sure to compile and maintain their close-out documentation throughout the project, so that when it is time to submit their close-out packages in connection with final payment, they are not delayed tracking down or locating items such as subcontractor lien waivers, as-built drawings, and manufacturer warranties. Note that in the private contracting context, a contractor may attempt to negotiate all contract provisions to try to ease the burdens of onerous payment and close-out requirements, as well as other critical terms, such as dispute resolution provisions and requirements relating to the performance and inspection of the work itself.

In sum, contractors must stay on top of their administrative duties and responsibilities in connection with their contracts. No contracting party wants a construction dispute to end up in litigation, but if it does, the contractor will want to ensure that it has done everything by the book (or by the contract) to avoid getting tripped up by a technical contract prerequisite with which it failed to comply.

]]>https://www.csrealconblog.com/2017/11/articles/construction/contractors-know-contracts/feed/0Objectors Beware – Exposure to Claims Brought by Adversely Impacted Developers is Alive and Wellhttps://www.csrealconblog.com/2017/10/articles/construction/land-use-and-development/objectors-beware-exposure-claims-brought-adversely-impacted-developers-alive-well/
https://www.csrealconblog.com/2017/10/articles/construction/land-use-and-development/objectors-beware-exposure-claims-brought-adversely-impacted-developers-alive-well/#respondTue, 31 Oct 2017 13:53:01 +0000https://www.csrealconblog.com/?p=1919Parties objecting to development projects have traditionally been immunized from liability for common law torts, such as malicious prosecution, abuse of process and tortious interference. This immunity, grounded in the well-recognized Noerr-Pennington doctrine, affords immunity to those who petition the government for redress. (See Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc. 365 U.S. 127 (1961); United Mine Workers of America v. Pennington, 381 U.S. 657 (1965) (holding that parties seeking relief from the government are generally afforded immunity unless such actions are objectively baseless).

While the immunity afforded objectors has been a difficult one to breach, recent decisions suggest that actions brought against these objectors require careful review of the facts and underlying circumstances before they can be summarily dismissed. In order to overcome Noerr-Pennington immunity, a litigant must satisfy a two-prong test: First, proof must be established that the actions of the objector were “objectively baseless,” meaning no reasonable litigant could realistically expect success on the merits of its claims. Second, proofs must also establish that the conduct in question was brought with the specific intent to further wrongful conduct through the use of the governmental process – as opposed to the outcome of that process. Importantly, the second prong is only considered if the challenged litigation is first found to be objectively meritless.

Recently, however, meeting the first prong has been made easier by our court’s consideration of an objector’s track record and the presence of other repeated failed filings. (SeeMain Street at Woolwich, LLC v. Ammons Supermarket, Inc. 451 N.J. Super. 135 (App. Div. 2017). In Main Street, the court relied upon a Third Circuit decision in holding that the trial court failed to properly consider the defendant’s alleged pattern of sham litigation. Hanover 3201 Realty, LLC v. Village Supermarkets, Inc. 806 F.3d 162, 180 (3rd Cir. 2015), cert. denied __ U.S. __, 136 S.Ct. 2451 (2016). By demonstrating that an objector has engaged in a series of unsuccessful administrative and/or court challenges, developers can establish that this activity represents a pattern of utilizing the process to serve the anticompetitive purpose of injuring market rivals. Under such circumstances, a court could very well conclude that the claims of such objectors were not brought to redress any actual grievances, but rather to promote delay and cause injury. Accordingly, this broad immunity can be lost where the conduct at issue is merely intended to interfere directly with the business relationships of a competitor.

As a consequence, before filing any action seeking government redress, a putative objector, much like any other litigant, should carefully evaluate the bases for its objections with a legal professional to ensure that they are both grounded in fact as well as supported by sound legal underpinnings. To do otherwise is to invite abuse of process type claims that now have a much greater likelihood of success. Reviewing any possible strategy that involves objecting to a rival’s application for development is now, more than ever, a critically important step to insulating the objector from exposure to counter-suits that were previously viewed as questionable nuisance type actions.

]]>https://www.csrealconblog.com/2017/10/articles/construction/land-use-and-development/objectors-beware-exposure-claims-brought-adversely-impacted-developers-alive-well/feed/0NJ Courts Continue Expansion of Insurance Coverage for Construction Defects: “Continuous Trigger” Doctrine Appliedhttps://www.csrealconblog.com/2017/10/articles/construction/nj-courts-continue-expansion-insurance-coverage-construction-defects-continuous-trigger-doctrine-applied/
https://www.csrealconblog.com/2017/10/articles/construction/nj-courts-continue-expansion-insurance-coverage-construction-defects-continuous-trigger-doctrine-applied/#respondWed, 25 Oct 2017 17:49:17 +0000https://www.csrealconblog.com/?p=1915New Jersey courts are continuing their trend of extending insurance coverage for third-party construction defect claims. Following last year’s NJ Supreme Court decision in Cypress Point Condo. Ass’n, Inc. v. Adria Towers, LLC, 226 N.J. 403 (2016), which broadly interpreted the standard CGL policy to extend an insured developer’s coverage to include claims of damage caused by the work of subcontractors, the New Jersey Appellate Division recently issued a published decision approving a trial court’s use (though not its application) of the “continuous trigger” theory of insurance coverage to third-party construction defect claims, thereby, potentially extending coverage in such cases over multiple policy years.

In Air Master & Cooling, Inc. v. Selective Insurance Co., A-5415-15T3 (N.J. App. Div. October 10, 2017), the Appellate Division reviewed a trial court’s decision in a declaratory judgment action filed by a subcontractor against two of its insurers. Those insurers had declined coverage and refused to defend the subcontractor in a construction defect litigation filed by the condominium association (the “Association”), on whose 101-unit building the subcontractor had performed certain HVAC work on the roof and in each individual unit. The Association and certain unit owners claimed damage due to progressive water infiltration, which they attributed to defective workmanship, and the subcontractor was joined in the litigation as a third-party defendant.

The subcontractor had performed work at the building from November 2005 through April 2008. In early 2008, unit owners began to notice water infiltration into their units and resulting damage. A newspaper article published 2010 detailed the 2008 discovery of leaks by the unit owners. In May 2010, the Association’s consultant issued a report identifying certain areas of the roof in need of replacement though noting it could not determine when the infiltration had occurred.

The subcontractor had three insurers from 2005 through 2015. The insurer for the period November 2005 through June 2009, agreed to defend the subcontractor under a reservation of rights, as it was the insurer during the period the work was performed and at the time the first water infiltration was alleged to have been discovered. The next insurer, Selective Insurance, provided coverage from June 2009 through June 2012, and disclaimed coverage, on the basis that the property damage was alleged to have manifested before the policy periods had begun. The third insurer, with coverage from June 2012 through June 2015, also disclaimed coverage, and was dismissed from the subcontractor’s declaratory judgment case, without appeal, on the basis that its 2012 coverage commenced long after any leaks had started and any resulting damage manifested.

After some discovery was conducted, Selective moved for summary judgment, which was granted by the trial court. The trial court applied the continuous trigger doctrine of insurance coverage in analyzing whether Selective owed the subcontractor a duty to defend the construction defect claim. It determined conclusively, however, that the damage to the building had manifested itself before Selective’s June 2009 coverage began.

On appeal, the Appellate Division, while agreeing that the continuous trigger doctrine was applicable in the construction defect context, disagreed with the ultimate determination – or at least found that the record was not sufficiently developed to make that determination. The appellate court, therefore, reversed the judgment in favor of Selective and remanded the case back to the trial court with guidance on the application of the continuous trigger doctrine in the construction defect coverage context.

The continuous trigger effectively grants continuous coverage to an insured in connection with a third-party damage claim from the date of the initial exposure to the harm through the date of the manifestation of the injury resulting from the harm. The appeals court rejected the subcontractor’s attempt to extend the doctrine even further to extend to the date of “attribution” – that is, when the particular damage could be attributed to a particular insured. Doing so would be akin to transforming policy to claims made policy from occurrence-based, and likely escalate premiums or deter policies from being written. Instead, the court determined that the endpoint of the coverage, or manifestation (or “last pull of the trigger”), should be the date when the harm has sufficiently become apparent or manifests itself to trigger a covered occurrence.

The Appellate Division, guided by the precedential first-party coverage case, Winding Hills Condo Ass’n v. North American Specialty Ins. Co., 332 N.J. Super. 85 (App. Div. 2000), held that the manifestation occurs at that time of the “essential” manifestation of the injury, and not necessarily at the initial discovery of the injury. The essential manifestation is “the revelation of the inherent nature and scope of that injury.” In examining whether the May 2010 report (during Selective’s policy period) or 2008 unit owner observations of water infiltration (before Selective’s policy period) should be used as the manifestation or end date of coverage, the court found the record too sparse to make that determination. There were no depositions, or other evidence, revealing who knew what and when about these construction defects, and the court refused to rely on hearsay statements of the unit owners in the newspaper article.

Accordingly, the court remanded the case back to the trial court for a determination of what information about the building defects at issue were or reasonably could have been revealed between the time of the unit owner complaints and the start of Selective policy in June 2009. The appeals court also noted that the matter was further complicated by the fact that the water infiltration associated with the roof was not discovered until the May 2010 expert report, while the newspaper article does not mention the roof. Thus, there were genuine issues of material fact as to, among other issues, when water infiltration problems on the roof first became known or reasonably could have been known.

The Air Master decision continues a trend in New Jersey jurisprudence of expanding, within reason, CGL coverage to insureds. In particular, in construction defect cases, the courts have recently liberally interpreted policies and legal theories to afford more coverage to insureds. Where construction defects cause progressive property damage, as in the common case of water infiltration, Air Master will help to guide insurers, insureds and their respective counsel in analyzing whether, based on the facts alleged by a third-party, coverage is available for particular policy years. It is also likely to spawn additional discovery and expense in the underlying construction defect cases specific to those issues.

]]>https://www.csrealconblog.com/2017/10/articles/construction/nj-courts-continue-expansion-insurance-coverage-construction-defects-continuous-trigger-doctrine-applied/feed/0The Critical Importance of Properly Serving a Construction Lien Claimhttps://www.csrealconblog.com/2017/10/articles/construction/critical-importance-properly-serving-construction-lien-claim/
https://www.csrealconblog.com/2017/10/articles/construction/critical-importance-properly-serving-construction-lien-claim/#respondMon, 16 Oct 2017 18:55:35 +0000http://www.csrealconblog.com/?p=1909So, you properly file your construction lien claim within the time allowed by the New Jersey Construction Lien Law (“CLL”), and then timely send out a copy of the lien by certified and ordinary mail to the address of the condominium building where you performed your work. All set, right? Not so fast, according to a New Jersey appellate panel.

In the newly-issued, unpublished decision, Santander Condominium Assoc., Inc. v. AA Construction 1 Corp., Docket No. A-0525-15T3 (N.J. App. Div., October 13, 2017), the Appellate Division upheld a trial court’s decision ordering the discharge of a subcontractor’s construction lien claim upon the application of the condominium association (the “Association”) against whose property the lien was filed, and awarding attorneys’ fees and court costs to the Association. While the subcontractor apparently followed the letter of the law in filing its construction lien claim, its fatal flaw lay in its defective service of the lien claim.

The subcontractor, which had performed façade repair work for the contractor of the Association, filed its construction lien claim after the contractor failed to pay the subcontractor for its work. The subcontractor then sent the lien for service by certified and ordinary mail to the street address of the condominium property. The CLL allows for simultaneous certified and ordinary mail service, but it must be made “to the last known business or residence of the owner or community association….” The physical condominium street address was not the business address of the Association, which, like all corporations, had an easily discoverable registered agent address filed with the State. Service, therefore, was defective.

While service is supposed to be made within 10 days of the lien filing, it may be made later and still be enforceable as long the owner/association is not materially prejudiced by the late service. Disbursement of funds by the owner/association in the interim, however, is, on its face, deemed material prejudice under the CLL. In the Santander case, after the lien was filed, the Association paid the contractor in full on its contract, and, because the lien was deemed to never have been properly served, the CLL’s clear and unambiguous language required that the lien be deemed unenforceable, as there was no longer a lien fund against which the subcontractor’s lien could attach.

The court noted that, even if service had been made to the Association’s proper business address, the certified mailing of the lien had been returned unclaimed and the subcontractor had failed to present any evidence relating to the status of the ordinary mail. Though not discussed in the decision, had the service address been proper, the subcontractor should, at the very least, have proffered evidence that the ordinary mail was never returned as undelivered by the postal service and, therefore, should be presumed to have been delivered to that address.

The court also affirmed the trial court’s award of attorneys’ fees to the Association under the CLL (N.J.S.A. 2A:44A-30(c)) because the Association filed its application to discharge a lien that the court deemed to have been filed “without factual basis”.

That last determination, however, is questionable at best, as the lien at issue appears to have been filed with a factual basis, but was deemed unenforceable solely due to a failure of proper service and the Association’s subsequent payment in full to the contractor. Improper service should not be equated with a lack of a factual basis supporting the lien. In fact, under a different section of the CLL (N.J.S.A. 2A:44A-15), which provides the bases for a determination of the forfeiture of lien rights based on an improper lien filing, the CLL defines “without basis” for purposes of that section as “frivolous, false, unsupported by a contract, or made with malice or bad faith or for any improper purpose.” The failure to properly serve an otherwise factually supported lien does not appear to be accounted for in the language of the CLL as a basis for the award of attorneys’ fees.

In any event, the Santander case does serve to illustrate the critical importance of properly and timely serving a construction lien claim. When filing a lien against a condominium association or any other corporate real property owner, a claimant must do a corporate search with the State to ensure it has the proper business address for that entity. Of course, there may be other ways to determine the proper last known business address of the owner/association, for example, through recent correspondence or documentation from that corporation, but the corporation’s registered agent address, as filed with the State, should always be deemed a valid address for service of a lien. Without proper service, the lien will remain unenforceable, and to the extent the owner makes payment to its contractor prior to proper service, the lien fund available to a subcontractor or supplier is at risk of complete depletion. If there is any question regarding the validity or service of a construction lien claim, it is always a good idea to consult an attorney well versed in the requirements of the CLL.